Boomers — individuals born between 1946 and 1964 — represent 21% of the U.S. population, according to Axios. And this year, the country will see the largest surge of retiring Americans in history according to a report by Alliance for Lifetime Income’s Retirement Income Institute.
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Indeed, more than 4.1 million Americans will turn 65 each year through 2027, which amounts to more than 11,200 Americans retiring every day. And according to the report, millions of these retiring Americans lack sufficient protected income and face financial insecurity.
So where did these boomers go wrong, and how can younger generations do better?
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Not Saving Early Enough
Many people don’t — and didn’t — think seriously about saving for retirement until in their 40s and 50s. And it makes a huge difference.
“While there are countless variations, here’s one example,” said Kyle Enright, president of Achieve Lending. “Save $500 a month for 10 years, at a 4% interest rate compounded daily, and you’d have almost $74,400. Do the same thing for 40 years and you’d have more than $594,000.”
Relying On Social Security Income
The common thought for a long time was that Social Security would be enough to live on, said Enright.
He noted, however, that the reality is that Social Security was intended to help those who needed it and supplement other income, never to be the primary or only source of income for retirees.
“Consider that the estimated average monthly Social Security retirement benefit for January 2024 is $1,907,” he said. “While that is a healthy amount to supplement an income, for most people, it is not enough to live on.”
In addition, there are differences in life expectancy today than when the Social Security Act was passed in 1935, he said. People are living much longer, with many more years of financial needs (and medical expenses).
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Not Thinking About or Planning Their Retirement Lifestyle in More Detail
Too few people create realistic retirement budgets before they retire to understand their needs accurately.
According to Enright, this means that many people retire without a solid plan in place for working part time, traveling, pursuing hobbies or taking care of grandchildren.
Lack of Financial Literacy and Guidance
While boomers faced several challenges in retirement planning leading to their current predicament, a significant mistake was a lack of financial literacy and planning, some experts said.
“Many boomers didn’t fully understand the complexities of retirement savings and investments, often underestimating the amount needed or making poor investment choices,” according to Cliff Ambrose, founder and wealth manager at Apex.
In addition, he noted that some boomers didn’t seek professional financial advice, either due to cost concerns or overconfidence in their own abilities.
“This lack of professional guidance could have led to suboptimal financial decisions,” he added.
What Can Younger Generations Do Better?
According to Michael Shamrell, VP of thought leadership, Fidelity Workplace Investing, there are also many boomers who are in good shape to retire. And younger generations can emulate what they did: taking a long-term approach to their retirement savings, making steady, consistent payments over time.
“They have avoided making changes based on short-term economic swings — positive or negative — and many have also contributed enough to get their company match,” said Shamrell. “If your employer matches any portion of your retirement contributions, consider maxing out by contributing up to at least the match amount. Aim to save at least 15% of pretax income annually for retirement, including any employer match.”
Other options include considering a target-date fund, as these help keep investors on their savings track by preventing them from being too reactive to the market’s twists and turns and rebalancing their portfolio with a mix of stocks, bonds and money market accounts as the fund approaches its target date, said Shamrell.
And then of course, start and beef up an emergency fund.
“Putting away money from each paycheck to protect against emergencies can provide big dividends both now and later as unexpected expenses pop up,” he added.
Finally, experts said that younger generations can do better by saving as early as they possibly can.
“Creating good savings habits early will leave you with the best chance of having a successfully funded retirement,” said Evan Potash, wealth management advisor at TIAA.
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This article originally appeared on GOBankingRates.com: Where Boomers Went Wrong in Retirement Planning — and How Younger Generations Can Do Better